Chester Company analysis
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Description
1) The Chester Company has just purchased $40,900,000 of plant and equipment that has an estimated useful life of 15 years. The expected salvage value at the end of 15 years is $4,090,000. What will the book value of this purchase (exclude all other plant and equipment) be after its third year of use? (Use FASB GAAP) |
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$33,538,000 |
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$35,446,667 |
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$29,448,000 |
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$32,720,000 |
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2) What is the Quick Ratio of Chester? |
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1.39 |
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1.61 |
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.62 |
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.72 |
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3) Digby has a ROS of 0.09 (ROS = Net income/Sales). That means: |
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There are sales of $9 for every dollar of profit. |
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There is a 9% profit on each dollar of sales. |
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There are sales of $91 for every dollar of profit. |
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For every $9 of sales there is a profit of 1%. |
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4) Midyear on July 31st, the Baldwin Corporation’s balance sheet reported:
Total Liabilities of $103.453 million
Cash of $8.040 million
Total Assets of $172.520 million
Total Common Stock of $5.080 million.
What were the Baldwin Corporation’s retained earnings? |
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$74.147 million |
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$63.987 million |
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$72.027 million |
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$82.187 million |
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5) Review the Inquirer to determine Baldwin’s current strategy. How will they seek a competitive advantage? From the following list, select the top five sources of competitive advantage that Baldwin would be most likely to pursue. |
Select: 5 |
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Seek high plant utilization, even if it risks occasional small stockouts |
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Increase demand through TQM initiatives |
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Add additional products |
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Seek high automation levels |
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Offer attractive credit terms |
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Seek the lowest price in their target market while maintaining a competitive contribution margin |
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Reduce cost of goods through TQM initiatives |
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Seek excellent product designs, high awareness, and high accessibility |
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Accept lower plant utilization and higher capacities to insure sufficient capacity is available to meet demand |
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Reduce labor costs through training and recruitment |
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6) Rank the following companies from high to low cumulative profit, (in descending order, 1=highest, 4=lowest). |
Rank in order from 1 to 4 |
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Chester |
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Baldwin |
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Andrews |
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Digby |
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7) Which description best fits Chester in your industry? For clarity:
– A differentiator competes through good designs, high awareness, and easy accessibility.
– A cost leader competes on price by reducing costs and passing the savings to customers.
– A broad player competes in all parts of the market.
– A niche player competes in selected parts of the market.
Which of these four statements best describes this competitor? |
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Chester is a niche cost leader |
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Chester is a broad differentiator |
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Chester is a broad cost leader |
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Chester is a niche differentiator |
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8) If Baldwin issued 1000 shares of common stock at last year’s end price, the effect on the balance sheet would be: |
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Retained earnings would increase by $4,804 |
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Retained earnings would increase by $48,039 |
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Equity would decrease by $4,804 |
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Equity would increase |
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